On Factors explaining Organisational Innovation and its Effects

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Abstract

This paper demonstrates how various factors influence the probability of attempts at organisational innovation and the effects of such innovation. An integrated firm-level dataset obtained from two recent waves of the Norwegian Community Innovation Survey (CIS3 & 4) and firms’ financial accounts is used to investigate these factors. An analysis which employed a Heckman two-step estimation to ensure against potential sample selection bias demonstrates that, between 1999 and 2004, Norwegian firms were persistent in organisational innovation, and this persistence raised the (positive) effects of organisational innovation on their performance. In addition, the results indicate that a firm’s decision to pursue organisational innovation can be influenced by its past economic performance and the high costs of innovation. The results also reveal that a good share of firms in the sample undertook, and benefitted from, different types of organisational change, and such benefits could increase by means of the complementarity of organisational and technological innovation. In further explaining the rates and consequences of organisational innovation, this study argues that a firm’s age and size have different impacts on its decision to undertake organisational innovation and on the effects of such innovation on its performance. The study found some evidence to suggest that older, larger firms are more inclined to make an attempt at organisational change, while, in terms of outcomes, smaller firms are more able to benefit from such an attempt.

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